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The Effect of Global Economic Crisis Towards The Indonesia Economy

“THE EFFECT OF GLOBAL ECONOMIC CRISIS TOWARDS THE INDONESIA ECONOMY”

INTRODUCTION / BACKGROUND

Global economic crisis and Indonesia

The financial crisis that first emerged in the US in August 2007 has transformed into a global economic and job crisis. The latest projections from multilateral agencies suggest that the world economy will contract in 2009 for the first time since the Second World War.

According to the World Bank, the spreading global economic crisis is set to trap up to 53 million more people in poverty in developing countries this year on top of the 130-155 million driven into poverty in 2008 by soaring food and fuel prices.

This will bring the total of those living on less than US$2 a day to over 1.5 billion.

The World Bank also estimates that developing countries face a financing gap of $270-$700 billion depending on the severity of the economic and financial crisis and the strength and timing of policy responses.

Developing countries are likely to face higher spreads, and lower capital flows than over the past 7-8 years, leading to weaker investment and slower growth in the future.

What is the likely impact of the most severe global recession since the Second World War on the Indonesian economy?

At the beginning of 2008, there was considerable optimism that the Indonesian economy, unlike the 1997 financial crisis, would largely escape the effects of a looming global economic downturn.

By 2007, growth had reached 6.3 percent, the highest in the post-crisis period. The economy was poised to post a similar growth rate in 2008.

The stock market was booming and reached the highest level in its history in January 2008.

Indeed, in a January 2008 paper that assessed the medium-term economic outlook for Indonesia, Bank Indonesia observed:

The overall forecast is for further improvement in the Indonesian economy in the coming five years with growth in the range of 7.4-8.0 percent. This projection assumes that world economic growth and volume of world trade remain strong alongside sustained high prices for oil and natural gas and non-oil commodities, relative stability in world and Indonesian monetary policy, robust fiscal conditions in Indonesia and rising inflows of FDI in Indonesia.

The major sources of this growth will be significant inflows of FDI stimulated by improvements in the investment climate with FDI reaching 1.5 percent of GDP in 2012, bringing the share of investment to about 30 percent of GDP that year."

Throughout much of 2008, the monetary authorities seemed concerned with containing inflationary pressures stemming from the dual food and energy shocks. The official interest rate was increased from 8.0 percent in January 2008 to 9.5 percent in November 2008.

Since then, the mood of policy-makers has shifted. In its report on monetary policy in the final quarter of 2008, Bank Indonesia noted that *In Q4/2008, Indonesia's economic performance began to show signs of impact from the global economic downturn'.

The stock market plummeted reversing all the gains that took place between 2005 and 2008. The exchange rate depreciated significantly.

Official projections are that growth will be around 4 to 5 percent in 2009, but private sector forecasts suggest a *worst-case' scenario of 2.5 percent growth in 2009.

A recent World Bank policy note classifies Indonesia as a *high exposure' country that faces significant crisis-induced deceleration of growth and a significant increase in poverty.

How has the Indonesian government responded to the rapidly deteriorating international economic environment?

The Indonesian government has responded to the rapidly evolving global economic crisis with a combination of financial, monetary and fiscal policies. The deposit guarantee scheme for the banking system has been substantially increased to encourage continued lending to the real economy.

Monetary policy has been eased. The interest rate (as of March 4, 2009) stands at 7.75 percent, the lowest level since July 2005.

The Governor of the Bank of Indonesia, during a speech given at the 2009 Banker's Dinner, noted that the official interest rate is likely to be in the 5 to 7 percent range. A fiscal stimulus package has been enacted (effective from March 1, 2009) amounting to 1.4 percent of GDP.

It is doubtful whether these responses are going to be effective in dealing with the *worst-case' consequences of the global recession on Indonesia. Ross McLeod, a well known Indonesia specialist, notes that although the deposit guarantee scheme has been *increased by a factor of 20 . it still covers only about 50 percent of the total value of assets.

If conditions deteriorate, there is every possibility of a run on banks by large depositors'. While the reductions in the official interest rate are welcome, one wonders whether the rate was held too high for too long.

Given that monetary policy operates with a long and variable lag, it is difficult to assess the extent which the current easing of monetary policy can offset the effects of a phase of tightening that was sustained between January and November 2008.

The fiscal stimulus package deserves further scrutiny. If the worst case scenario of growth falling well below the projected 4 percent rate materializes, then the magnitude of the fiscal policy response may not be enough.

One can also express reservations about the composition of the fiscal policy package. Approximately 77 percent of the Rp73.3 trillion is in the form of tax cuts. They consist of reductions in both indirect taxes and income taxes.

The balance is directed towards infrastructure expenditure (Rp12.2 trillion) and direct subsidies (Rp4.8 trillion). Thus, a modest amount has been allocated towards enhancing job-creating public expenditure and hardly any resources seem to have been directed towards scaling up the social protection system.

Yet, it is widely acknowledged that tax cuts are not as effective as job-creating public expenditure or a scaled up social protection system in dealing with the consequences of a systemic global economic downturn.

The Indonesian government seems to have designed its fiscal stimulus package by focusing on its impact on the unemployment rate. A *simulation' exercise was undertaken by the Coordinating Ministry to work out how the unemployment rate will behave with expansionary fiscal policy and without it.

The exercise that was undertaken demonstrated that fiscal expansion along the lines described here would contain the rise in the unemployment rate to a prescribed threshold (8.3 percent in 2009).

Given the nature and structure of the Indonesian labour market, the aggregate unemployment rate is not a robust indicator of the well-being of the Indonesian work-force.

A lot more attention should have been given to poverty-sensitive indicators in designing the fiscal stimulus package.

In sum, throughout much of 2008, the Indonesian government did not seem particularly perturbed by the rapidly unfolding global economic crisis and its implications for the national economy.

There was a growing realisation in the final quarter of 2008 that Indonesia will not be immune to the global economic downturn.

It remains to be seen how effective national policy responses will be in dealing with the growing challenge of sustaining growth in the grim international environment of today.

One must also appreciate the fact that a global recession of the severity and magnitude facing the world today requires globally coordinated action. Indonesia, as a member of the G20, has an opportunity to play a pro-active role in urging such collective action.

Domestically, Indonesia must position itself among other developing countries so that it can be among the first to benefit from the global recovery.

PROBLEMS

Indonesia is suffering from gradually increasing impacts of the global financial crisis, with its export value growth in 2009 predicted to drop below zero.

Indonesian central bank (Bank Indonesia)'s Deputy Governor Hartadi A Sarwono said on Thursday that the country's export value is expected to drop 4.6 percent this year.

Hendri Saparini, director of the Econit Advisory Group, also predicted on Wednesday that the country's export value growth this year will stand at minus 5 percent.

"This year, it is not necessary to expect more from export activity, because growth in this sector will only stand at minus 5percent," he said.

The opinions of both the central bank and the consultant group are echoes of the prediction made by the National Development Planning Board on March 11, which said that Indonesia's export value would fall by 6 percent this year. According to the government department, Indonesia's non-oil product export value will fall 20 percent or 21.6 billion U.S. dollars this year from 108 billion dollars in 2008.

Their predictions have partly come true, seeing the country's export value dropped 17.7 percent month on month this January.

Suffering from the export decreasing, Indonesia's export-related companies, including traders and manufacturers, HAVE TO EXPAND LAY-OFFS so as to save their costs.

DESCRIPTIONS

Sofyan Wanandi, chairman of the Indonesian Employers Association, said on March 13 that the country's unemployed population had grown to 240,000 by this month, most of which came from labor-intensive industries, though the governmental statistics showed that figure was 37,909.

Nevertheless, the big unemployment inevitably reduced Indonesia's purchasing power and lowered market demands, while the country's major commodity supports remained adequate. Thus, Bank Indonesia, considering the low fuel price on the International market, predicted the country's inflation rate this year will go down to 5-7 percent, which gives it spaces to cut the benchmark interest rate.

Bank Indonesia cut the bank's benchmark rate by 50 basis points from 8.25 percent to 7.75 percent on March 4, seeing the country's inflation rate in February recorded at 8.6 percent. That is the fourth time for the central bank to cut benchmark interest rate since last December.

However, the commercial banks in Indonesia did not actively follow suit to cut their interest rates sharply, but only decrease the lending rate from 14.2 percent at the end of last year to 13.93 percent by the second week of March and the deposit rate from 8.75 percent to 8.32 percent, averagely

Those are not enough, said analysts, adding that banks should keep lending rates below 13 percent to guarantee the economy running at the targeted 4.5 percent economic growth.

Therefore, many analysts and some officials in Indonesia had lost their confidence in the 4.5 percent economic growth this year, even Bank Indonesia on Thursday reduced its economic growth expectation to 4 percent.

However, President Susilo Bambang Yudhoyono seems to remain optimistically about the figure.

President Yudhoyono's confidence came from the government's plan of allocating a total 73.3 trillion rupiah (about 6.1 billion U.S. dollars) economic stimulus package.

"Let us make the economic stimulus a success because it is the state's and people's money and therefore it should be aimed at the right targets and used as much as possible to improve the people's welfare," said the president on March 7, adding that he hoped the funds would be channeled in April.

Of the package, 12.2 trillion rupiah (about 1 billion dollars) is for certain departments and ministries for infrastructure development across the country, which is 2 trillion rupiah more than the government's previous plan. The president said that infrastructure development would accelerate economic growth and enable maximum absorption of the work force amid the global financial crisis.

According to the previous plan, the 10.2 trillion rupiah (about850 million dollars) could be used to create 1 million jobs directly and another 1 million to 2 million jobs indirectly. Besides, the money is also expected to bring 900,000 laid-off labor forces back to work.

Furthermore, the Indonesian government supports the proposal of raising fiscal stimulus to up to 2 percent of gross domestic product (GDP), particularly in 2010, at the meeting of G-20 finance ministers and central bank governors in London.

"The fiscal stimulus for 2009 is not a problem. The problem is the fiscal stimulus for 2010 that needs to be raised," Head of the Fiscal Policy Board at the Indonesian Finance Ministry Anggito Abimanyu said on Monday.

Although he said the government has not decided about the fiscal stimulus for 2010, it is possible for the country to allocate stimulus funds worth about 105 trillion rupiah (about 8.75 billion dollars) next year.

In spite of the big meaning, the huge stimulus package will definitely increase the budget deficit of the Indonesian government.

According to the Financial Ministry's official director general of budgetary affairs Anny Ratnawati, the deficit will hit 137 trillion rupiah (about 11.4 billion dollars) this year, accounting for 2.6 percent of the country's GDP, as against last year's 51 trillion rupiah (about 4.25 billion dollars), or 1 percent of the GDP.

Ratnawati made that calculation when the stimulus package was still 71.3 trillion rupiah. With the additional 2 trillion rupiah, the country's budget deficit in 2009 will reach about 139 trillion rupiah (about 11.6 billion dollars).

In order to cover the deficit, Indonesia has prepared standby loans worth 44.5 trillion rupiah (about 3.71 billion dollars) and is still seeking loans from other countries and international financial institutions.

Bank Indonesia' Sarwono said on Thursday that the government was in a process to finalize a standby loan worth 1 billion dollars from the Islamic Development Bank (IDB) and the French government. He also said that the government had received 5.5 billion dollars (from Japan, Australia and the Asian Development Bank) before that.

On the other hand, according to the Investment Coordinating Board (BKPM), Indonesia is expected to maintain a 20 percent foreign direct investment growth this year, which is another positive signal to the country's economic growth.

BKPM chief Muhammad Lutfi said on Feb. 24 that though investment growth was not too high this year compared with last year's 43.8 percent, in view of the current global economic crisis the country's economy was still better than that of other Asian countries.

CONCLUSION

The global financial crisis that started from the United States raises a very broad impact, to Indonesia. And the impact will last very long, at least until three years into the future. For that, all element of Indonesia must put extra efforts to overcome the crisis. Government strength and stability also a best solutions to overcome the crisis.

REFERENCES

http://indoprogress.blogspot.com/2009/03/pemilu-dan-depresi-ekonomi.html

http://news.xinhuanet.com/english/2009-03/20/content_11037243.htm

http://www.associatedcontent.com/article/1111886/impact_of_global_economic_crisis_in.html?cat=3

http://www.thejakartapost.com/news/2009/05/05/global-economic-crisis-and-indonesia.html

Product Lifecycle, SWOT and Tactics

Choose a product of your choice and do a product life cycle with the right explanation.

Product
Mineral water

Brand
AQUA

AQUA was established since 1973 by PT AQUA Golden Mississippi. At the first it distributed to the market, the sales of AQUA was steadily rose and the brand was steadily known by local people. Then in 1998, after DANONE group merged with AQUA, it caused AQUA brand became more booming in Indonesia. The growth then doubled and became “Star” in Indonesia market. Today, AQUA has already reached 45% of market share and becomes market leader.

Though it has many competitors now, such as ADES (main competitor), AQUA still becomes number one mineral water in Indonesia. We can say that, it is already at Cash Cow position in BCG or maturity position in PLC, where it has many loyal consumers and the positioning in the market is also strong.

Milestone
1973
PT AQUA Golden Mississippi was established as a pioneer in the bottled mineral water industry in Indonesia. The first factory was built in Bekasi.

1974
AQUA’s first product was launched in the form of 950 ml glass bottles from its Bekasi factory at a price of Rp.75 per bottle.

1984
AQUA’s second factory was established in Pandaan, East Java, as an effort to get closer to its customers in that area.

1985
AQUA developed 220 ml PET packaging for its bottled water, making AQUA products better quality and safer for consumption.

1993
Introduced the AQUA Peduli (AQUA Cares) program as a step toward recycling plastic AQUA bottles for reutilization.

1995
AQUA became the first mineral water producer to apply the in-line production system at its Mekarsari factory. This process allowed the simultaneous production of AQUA water processing and packaging. This system results in the direct filling of newly produced bottles, so that the production process is more hygienic.

1998
The merging of the AQUA and DANONE groups on September 4, 1998, constituted an important step toward improving the quality of AQUA products and has placed AQUA in the position of the largest bottled mineral water producer in Indonesia.

2000
Right at the change of the millennium, AQUA launched its AQUA-DANONE product label.

2001
On March 21, DANONE raised the number of its shares in PT. Tirta Investama from 40% to 74%, and became the majority shareholder of AQUA group. On November 1, AQUA launched a new design for the 380 ml glass bottle.

2002
AQUA was awarded “The Indonesian Best Brand Award”. 0n June 1, AQUA started implementing The “Kesepakatan Kerja Bersama” (KKB 2002-2004) program.

2003
AQUA increased its production capacity by establishing a new factory in Klaten. AQUA also started implementing the System Application System and Products (SAP) for data processing and the Human Resources Information System (HRIS), which allow for better integration of the company’s work process.

2004
AQUA launched a new logo. AQUA also launched its new product, AQUA Splash of Fruit with the essences of strawberry and orange-mango flavors in it. The launching of AQUA Splash of Fruit helped strengthen AQUA’s position in the beverage category.

2005
Danone AQUA lent a hand to tsunami victims in Aceh. AQUA initiated the first production of MIZONE, a nutritional drink from DANONE, which comes in orange, lime and passion fruit flavors, on September 27.

Do a SWOT analysis for the chosen product

1. Strength
· Strong positioning in the market (Aqua has strong brand power)
· Aqua is a market leader in this business (it dominates more than 45% market share)
· To sell Aqua product is not difficult, because it is a daily consumption product and customers know about its quality.
· Aqua is available in various size and packaging but still with competitive prices (which means people from all segments can buy Aqua)

2. Weakness
· Aqua is only a pure water (there is no variant favors)

3. Opportunities
· Large market of distribution
· Majority of the public know AQUA
· Many events that can be sponsored by AQUA as the media promotions

4. Threat
· Lack of clean water resources
· Tight competition
· Aqua is sabotaged (reproduced or distributed by unauthorized people)
· Refill water depots in local area that offer cheaper price
· Economy Crisis
· Natural Disasters

Choose one strategy that you would do for the next one year on your chosen product

Strategy
Become the most qualified mineral water in Indonesia, which means qualified in cleanness, composition, and safety.

With Marketing Mix of your choice, what are the tactics to achieve the strategy

1. Physical evidence
· Create a new seal which is safer and difficult to be harmed.
· Adding hologram on the packaging and seal to show the genuine product.

2. Price
· Prices should be competitive
· For supplier or partner we cooperate with, we will give special price in charge they only sell AQUA

3. Process
· Tighten the security in production, packaging, and distributions to avoid the product imitations (sabotage).
· Allow factory visit by public who wants to see the process of AQUA production. It can proof to the public that AQUA is safe to be consumed and can be trusted.

4. Promotion
· Promote the new packaging of AQUA by any promotion tools.
· Sponsor sports events
· Hold special program, like our current program which is “AQUA untuk anak Indonesia” where for every 1 liter of AQUA from the specially labeled 600 ml and 1500 ml products sold, AQUA will help to provide 10 liters of clean water that can be used for cooking, bathing etc. Additionally this program will also be complemented with hygiene promotion and capacity building activities aimed at empowering communities.

5. People
· Hired qualified and responsible people as the employees
· Use expert endorsement to educate public about the advantages of consuming AQUA
· Provide hotline customers services
· Improve the quality of management through training and seminar

6. Place
· Must be available at every kind of location, such as school, hospital, café, gym, etc
· Especially for particular program (like “AQUA untuk anak Indonesia”), it should reached villages, like NTT and Irian Jaya which have problem in water supply.

7. Product
· Change the main function of product. We can produce AQUA for different needs with different quality, such as for consumption and beauty care we provide high quality, for washing rice, vegetable or fruit we provide standard quality, and for washing clothes and dish we provide clean quality.

Crisis Communications Case Studies

Lecturer: Mr. Arnold Paalam

Crisis Communications Case Studies

Ford Motor Company
During the late 1980s into the 1990s, Ford Explorers equipped with Firestone Wilderness tires were linked to nearly 150 deaths and more than 500 injuries in the United States alone. Concerned about the company’s bottom line and its reputation, Ford Motor Company employed what might be called an “ignore it and it will go away” approach to crisis communications.

The lack of a cohesive crisis communications strategy, paired with poor management decisions, resulted in a stock price drop of $11.78 per share. Even greater was the damage to the company’s reputation. Today, the Ford/Firestone debacle is considered by many to be a textbook example of what not to do when facing a crisis.

So what did Ford do wrong?
•    They didn’t put customer safety and needs first.
–    They covered up the safety defects for more than 10 years.
–    They didn’t immediately recall the product once it started to fail.
•    They had no crisis communications plan in place.
–    And even when the situation continued drawing national and international attention, they held off on any formal plan.
•    They were reactive, not proactive.
–    Once committed to a recall, they were slow in approaching the public and media.
–    They ignored a corrective engineering proposal to enhance the stability of the Explorer, cited among the worst vehicles for rollovers.
•    They weren’t a resource for information on the situation.   
–    Ford CEO Jacques Nassar didn’t attend early House subcommittee hearings on the issue.
–    They didn’t hold regular press briefings or press conferences.
–    They didn’t provide a way, place or site for consumers to find the latest information on the tires, the Explorers or the situation.
–    Consumers were left in the dark about how the company was going to fix the problem.
•    They pointed fingers, rather than take responsibility.
–    Ford Motor Company repeatedly blamed Firestone tires, in spite of the fact that crash statistics showed that the Explorer had a higher incidence of tire-related accidents than other sport-utility vehicles, no matter the brand of tire.
–    Ford released documents showing that Firestone had received a disproportionate amount of complaints about the Wilderness series since 1997.
–    Rather than focusing on fixing the problem, they tried to pass the buck.


Tylenol

In 1982, Johnson & Johnson (J&J) faced a major crisis that had the potential to send the company into financial ruin. Tylenol, the country’s most successful over-the-counter product, with over one hundred million users, was under attack.

Sealed bottles were tampered with and extra-strength Tylenol capsules were replaced with cyanide-laced capsules. These bottles were then resealed and placed on shelves of pharmacies in the Chicago area. Seven people died as a result. Tylenol was called upon to explain why its product was killing people.

The company first learned of the deaths from a local news reporter. A medical examiner had just given a press conference saying people were dying from poisoned Tylenol. Tylenol had to act fast.

What did Tylenol do right?
•    J&J put customer safety first.
–    Company Chairman James Burke immediately formed a seven-member strategy team with the goal of determining how best to protect people, and then, how to save the product. Their first action was to alert consumers nationwide.
–    They pulled all advertising and immediately stopped production of the product.
–    After finding two more contaminated bottles, the company ordered a national withdrawal of every capsule. (This showed that no matter the cost to the company, customer safety was priority number one.)
•    They were candid. J&J used both public relations and advertising to communicate their strategy, keeping customers informed and in the loop.
–    They issued a national alert telling the public not to use the product.
–    They set up a 1-800 phone line so people could call in with questions and concerns.
–    They established a toll-free line for news outlets. This line also included taped daily updates.
–    They held press conferences at corporate headquarters and set up a live television videofeed via satellite to New York.
–    The chairman went on “60 Minutes” and the “Donahue” show to share the company’s strategy.
•    They offered answers.
–    J&J presented an industry first — triple-safety-seal packing that included a glued outer box, a plastic seal over the bottle’s neck, and a foil seal over the bottle’s mouth. Tylenol released the tamper-resistant packaging just six months after the crisis occurred.

Summary
Both of these cases bring to light the need for a well-thought out strategy in crisis situations. Today, Tylenol has regained its place in the marketplace and is considered one of the most trusted products in America. Ford continues to struggle with its reputation.

How do these cases relate to the tourism industry?
If we look at the work done by the 2003 Public Relations Task Force (Glacier Country, the Whitefish, Flathead and Missoula CVBs, Glacier National Park) during the wildfires of 2003, you’ll see many correlations between Johnson & Johnson’s strategy and ours.
•    We immediately established a crisis task force.
•    We put visitors and local businesses first.
•    We were candid with reporters and tourists about the situation.
•    We opened the Glacier Country Information Center 24 hours a day to answer traveler questions and concerns and provide alternate travel and recreation options.
•    We provided daily updates on the situation to media, businesses and tourists.
•    We employed both advertising and public relations tactics to tell our story.
•    We set up media interviews and media tours.

Glacier Country finished the year 2003 with above-average numbers. While properties and recreational outfitters in Glacier National Park suffered economic losses, those losses did not spread into the rest of the Flathead Valley. Some figures:
•    July occupancy: 88 percent compared to 79 percent in 2002.
•    August occupancy: 84 percent compared to 78 percent in 2002.
•    September occupancy: 67 percent compared to 64 percent in 2002.
•    Glacier Park International Airport reported a record August — up more than seven percent. September’s arrivals matched 2002.
•    Missoula’s occupancy also kept pace with the previous year.

While our occupancy percentages showed an increase, the average room rate may not reflect such dramatic growth. That’s because an estimated 10 percent of our overall occupancy was the result of fire crews and governmental employees who paid the lower government rates. We were, however, able to maintain. We didn’t lose ground. We proved that an effective crisis communications plan can work.

Sources:

“Ford Motor Company: What Went Wrong,” MBA 645 Public Relations in Crisis Management, University of Montana, instructor Dr. Fengru Li, August 18, 2003.

U.S. Department of Defense Crisis Communication Strategies Analysis Case Study: The Johnson & Johnson Tylenol Crisis. htpp://www.ou.edu/deptcomm/dodjcc/groups/02C2Johnson%20&%20Johnson.htm

Competitive Advantages

Marketing; Lecturer: Mr. Silih A Wasesa


Competitive Advantage

advantage from a lower cost structure: an advantage enjoyed by a company with lower costs than a rival, enabling it to sell for less or make greater profits at the same price as its rival.

Keuntungan yang di nikmati oleh sebuah perusahaan yang dimana perusahaan mengeluarkan cost yang lebih rendah daripada rivalnya, yang dapat membuat rival kalah dalam penjualan (market share) atau membuat keuntungan lebih dengan harga yang sama dengan rival.

Encarta

A competitive advantage exists when the firm is able to deliver the same benefits as competitors but at a lower cost (cost advantage), or deliver benefits that exceed those of competing products (differentiation advantage). Thus, a competitive advantage enables the firm to create superior value for its customers and superior profits for itself.

Cost and differentiation advantages are known as positional advantages since they describe the firm's position in the industry as a leader in either cost or differentiation.

A resource-based view emphasizes that a firm utilizes its resources and capabilities to create a competitive advantage that ultimately results in superior value creation. The following diagram combines the resource-based and positioning views to illustrate the concept of competitive advantage:

A Model of Competitive Advantage

Resources and Capabilities

According to the resource-based view, in order to develop a competitive advantage the firm must have resources and capabilities that are superior to those of its competitors. Without this superiority, the competitors simply could replicate what the firm was doing and any advantage quickly would disappear.

Resources are the firm-specific assets useful for creating a cost or differentiation advantage and that few competitors can acquire easily. The following are some examples of such resources:

* Patents and trademarks
* Proprietary know-how
* Installed customer base
* Reputation of the firm
* Brand equity

Capabilities refer to the firm's ability to utilize its resources effectively. An example of a capability is the ability to bring a product to market faster than competitors. Such capabilities are embedded in the routines of the organization and are not easily documented as procedures and thus are difficult for competitors to replicate.

The firm's resources and capabilities together form its distinctive competencies. These competencies enable innovation, efficiency, quality, and customer responsiveness, all of which can be leveraged to create a cost advantage or a differentiation advantage.


Cost Advantage and Differentiation Advantage

Competitive advantage is created by using resources and capabilities to achieve either a lower cost structure or a differentiated product. A firm positions itself in its industry through its choice of low cost or differentiation. This decision is a central component of the firm's competitive strategy.

Another important decision is how broad or narrow a market segment to target. Porter formed a matrix using cost advantage, differentiation advantage, and a broad or narrow focus to identify a set of generic strategies that the firm can pursue to create and sustain a competitive advantage.

Value Creation

The firm creates value by performing a series of activities that Porter identified as the value chain. In addition to the firm's own value-creating activities, the firm operates in a value system of vertical activities including those of upstream suppliers and downstream channel members.

To achieve a competitive advantage, the firm must perform one or more value creating activities in a way that creates more overall value than do competitors. Superior value is created through lower costs or superior benefits to the consumer (differentiation).

Sources: QuickMBA.com ; Encarta ; Indoskripsi.com

The example


Kecap ABC vs Kecap BANGO

Selama ini pasar kecap banyak didominasi oleh pemain pemain lokal maupun nasional, seperti kecap cap Bango dari Unilever, kecap ABC produksi Heinz ABC, dan kecap Indofood, dan baru-baru ini Wingsfood juga meluncurkan kecap yang bermerk Sedaap, yang merupakan strategi pemasaran dengan metode awareness pada produk sebelumnya yang pernah meng-gebrak market Indonesia (Mie Sedaap).

Sebagai contoh untuk competitive advantage, Kecap Manis cap Bango dengan rivalnya Kecap manis ABC. Kecap manis ABC lebih dulu in di Indonesia dibandingkan Kecap Bango yang masuk pada tahun 2001. Ketika Bango masuk ke Indonesia, ternyata yang terjadi adalah Konsumen menyambut produk tersebut dengan hangat, dan market share dari Kecap Bango mulai bertambah, bahkan hingga 2 kali lipat. Berdasarkan Indeks Loyalitas Konsumen Indonesia (Kategori Kecap) tahun 2005 dan 2006, ternyata Kecap Bango sudah menduduki peringkat loyalitas konsumen di atas ABC Heinz.

Ditinjau dari segi produk, kecap Bango lebih memposisikan sebagai kecap yang berkualitas tinggi dengan pengolahan yang khusus. Dimana bahan-bahan yang digunakan juga menggunakan bahan alami dan terpilih (pure and selected). Dari segi rasa kecap manis itu sendiri, Kecap Bango menggunakan yellow soy bean, yang menciptakan cita rasa kecap manis yang pas bagi orang Indonesia.

Maka secara garis besar dapat disimpulkan Kecap Bango dapat memberikan benefit yang lebih kepada konsumen dari pada ABC-Heinz. Baik dari kualitas dan positioning making, Bango secara langsung memberikan pengaruh terhadap decision making dalam memilih kecap.

CV

Personal Info

Full Name : Renold Sutadi
Address : Komando Raya 18 Sudirman, Jakarta Selatan 41361.
Mobile Phone : 0812-17611228
E-mail : renolds.2007@gmail.com
Place / Date of Birth : Pontianak, 14 May 1989
Gender : Male
Height : 175 cm
Weight : 67 kg
Religion : Buddha
Nationality : Indonesian

Educational Background
2007-2011 : The London School of Public and Relation, Jakarta
2003-2007 : SMA Santu Petrus, Pontianak

Skills
Language:
- Good command in English, both oral and written
- Fluent in Chinese
Computer softwares :
- Microsoft Office
- Microsoft Power Point
- Microsoft Publisher
- Microsoft Excel
- Adobe Photoshop CS4
- Adobe Indesign CS4
- Adobe Illustrator CS4
- Adobe Premiere
- Sony Vegas Pro 8.0
- Google SketchUp 7

Organization :
- Secretary of School Organization (OSIS) 04-05
- Drummers of Band Club at LSPR 08-09

Seminary :
2010 - Currently do a Survey with Maverick and LSPR "Pemanfaatan Jaringan Sosial di Kalangan Wartawan Indonesia"
2010 - Member of LSPR Marketeers Club - founded by Markplus.inc
2010 - Participant of "Biznet - Campus roadshow - Fiber optics" LSPR Jakarta
2010 - Voluntary Computing manage for  "Lecturer Conference" LSPR Jakarta
2010 - Voluntary Designer and Computing manage for "IPSDC - International Public Speaking & Debates Competition" LSPR Jakarta
2010 - Voluntary Designer and Computing manage for "1st Communication Research Conference" LSPR Jakarta
2009 - Participant of “Marketing : BANGKRUT (Bagaimana Mengatasi Krisis Dengan Menggunakan Teknologi)” Jakarta
2009 - Participant of "PR Competition: Creative Press Conference - The Power of PR in Crisis Management Seminar" Jakarta
2008 - Participant of “MARKPLUS CONFERENCE 09” Jakarta
2008 - Participant of “LSPR Cultural Month Competition“ Jakarta

Achievements
2009 1st Runner Up of PR Competition "The Power of PR in Crisis Management Seminar" Jakarta
2009 First Class Pass - Level 1 City and Guild English for Business Communication [ECB] Jakarta
2009 Pass with Credit – Level 2 Certificate in Marketing LCCI (London Chamber of Commerce and Industry from EDI) Jakarta